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On March 9, 2017, the United States Circuit Court for the District of Columbia heard oral argument in the case entitled Browning-Ferris Industries of California, Inc., d/b/a/ Browning-Ferris Newby Island Recyclery v. National Labor Relations Board, Nos. 16-1028, 16-1063 and 16-1064. (Our prior blogs about this case can be found here.) This appeal challenges the National Labor Relations Board’s (NLRB) new and imprecise standard for determining whether companies are “joint employers” for purposes of the National Labor Relations Act. The new standard, first issued in Browning-Ferris Industries, 362 NLRB No. 186 (Aug. 27, 2015), abandons consideration of a company’s direct and immediate control over employees in favor of a fact-specific approach that focuses more on “reserved” or “indirect” control.

The case was argued before circuit judges Patricia Millet, Robert Wilkins and Raymond Randolph. The panel heard argument from attorneys representing Browning-Ferris, the NLRB, and the Union which intervened in the case.

The panel grappled with the concepts of “reserved” and “indirect” control, as well as the line between “influence” and “indirect control.” If a contract is terminable at will, is that reserved or indirect control, such that both companies would automatically be deemed joint employers? If Browning-Ferris told its contractor, Leadpoint, that it was dissatisfied with certain Leadpoint employees because they were working too slowly, and Leadpoint replaced those workers, would that be indirect control? Or would this simply be an example of Browning-Ferris influencing its partner to provide better service? What about a hotel owner who directs a landscaper to change what the landscaper’s workers are doing? If the hotel owner had the right to make these requests of its contractor, but didn’t exercise that right, is that “reserved control” sufficient to confer joint employer status? Judge Millet noted that the NLRB’s new test seemed to “push the line” between joint employment and independent contracts, and said the Board had not addressed that issue head-on.

Browning-Ferris argued that the common law criteria for joint employment historically have focused on active control. Although a company’s “reserved” or “indirect” control could be considered by a court, the “center of gravity” of the inquiry into joint employer status must be the affirmative actions of a company vis a vis its contractor’s employees. In Browning-Ferris’s view, the NLRB wrongly conflated a company’s economic influence over its contractor with control over that contractor’s employees. Economic influence derives from the fact that Browning-Ferris’s at-will contract seeks an end product or result, and the company must have the right to hold the contractor to those terms. Thus, in the Browning-Ferris/Leadpoint example above, Browning-Ferris had economic leverage over Leadpoint because it had the right to monitor the contractor’s end product and demand better performance. However, the company argued, that was not tantamount to setting the terms and conditions of employment for Leadpoint employees.

In contrast, the Union and the NLRB argued that Browning-Ferris had “near constant oversight” of Leadpoint employees and their work performance, and characterized the relationship between Browning-Ferris and Leadpoint as a “unified chain of command.” Using Leadpoint supervisors as intermediaries to relay instructions amounted to “routine indirect supervision,” an indicator of joint employment. Conceding that Browning-Ferris did not hire, fire, or oversee benefits or paid leave for Leadpoint employees, it nonetheless viewed Browning-Ferris’s right to control the speed of production, place employees in particular positions on the line, and set work hours and break times, as active control. The NLRB seemed to concede that the hotel owner who transmitted instructions to the landscaping company (in the example above) could be considered a joint employer. Judge Millet noted that the NLRB had not provided any practical examples of how the new test would be applied.

Of significant concern to the panel was the Board’s analysis that says the putative joint employer will have a bargaining obligation over “those terms and conditions over which it possesses sufficient control for bargaining to be meaningful.” Judge Millet, in particular, expressed concern that companies would not know the scope of their bargaining obligations. She asked whether a union would make a specific request to bargain over specific issues, or a “general” request to bargain. The Union responded that any request for bargaining is a general request, and the parties always have to identify the subjects about which they are required to bargain. Judge Millet questioned how a company like Browning-Ferris could be expected to comply with a general request to bargain if it was only a joint employer with respect to certain aspects of the relationship. The Union opined that a reasonable employer could figure out the terms and conditions about which it was required to bargain.

Judge Millet also pressed the NLRB and the Union on whether an at-will contract between two parties would trigger a bargaining obligation – for instance, over the right to terminate the contract. The Union indicated that there likely would be such an obligation; the NLRB was more equivocal and said that the issue would be addressed by the Board in the future. It promoted what it called an “evolutionary approach” to this test, in which parties would receive further guidance going forward.

It is always difficult to predict a winner based on oral argument, and we will not venture to do so here. What is clear is that the panel identified the precise concerns expressed by employers who seek clarity and certainty about joint employment status under the NLRB’s new test. It remains to be seen whether the Court will resolve those concerns to the satisfaction of employers. We will continue to follow closely, and report in this space, on further developments in the case.